In general, yes, but there can be other factors that reduce the possibility to interact with many possible partners.
Geographical local monopolies—there are thousands of islands in the ocean, but most of them are too far from your home. You could replace your nearest trade partner with someone further away, at an extra cost; and if your nearest trade partner pushes you too far, you will do it. But within that interval, the negotiation is important.
Upfront transaction costs—even if the trade partners are equivalent, but it is costly to start interacting with another one (you have to do a complicated background check, you need to adapt to their specifics), this again creates an extra cost of switching, and an interval within which it is about negotiation.
Both can apply at the same time.
There is also a gray line between “cartel” and “people doing the same thing, acting selfishly, but updating on their competitors’ past actions”. To make it simple, imagine that that a fair price for a ton of bananas is $100. (Fair price = what would be the market balance if anyone could trade with anyone, in a world with zero transaction costs.) But there is a $8 cost for trading with someone who is not your geographically nearest trade partner. In this situation, the banana buyers can individually precommit to buy at e.g. $95, because they know that you will prefer to sell them for $95 rather than sell someone else for $100, pay $8 for transit, and only keep $92.
Now imagine the banana buyers have a website, where they publicly share their experience. (This is perfectly legal, right?) And there is this highly upvoted article called: “Don’t buy bananas for $100, you can get them for $95 using game theory”. It becomes common knowledge that the banana sellers suck at negotiation (they don’t have an analogical website), and that most banana buyers only pay $95. -- Armed with this knowledge, you can now precommit to only pay $90 for a ton of bananas next year, because now it is known that the best price your neighbor can get from anyone else is $95.
How many iterations can happen, depends on the exact shape of diminishing returns. For example, even if I was willing to pay $100 for my first ton of bananas, but using my power of precommitment I already got them from my neighbor for $85, I am probably not willing to pay $100 for the second ton of bananas. Suppose the second ton of bananas is only worth $90 to me. But to obtain it, from someone who is not my neighbor, I would have to pay $85 + $8, which is more. So I will not defect against the new equilibrium. -- Here I act almost like a cartel member (my first ton of bananas is worth $100 to me, and at the end I only buy one ton, and yet I precommitted to not pay more than $85), but I am still only following my selfish incentives, and at no point I am sacrificing a potential extra profit in favor of keeping the balance.
I feel like I am reinventing here the Marxist class conflict, in a more general form, with emphasis on sharing negotiation tactics. The essence is that one side shares their negotiation tricks, which work individually even if no one else is using them (this is what makes it not a cartel), but quickly become a new standard if shared; and the new standard—and the common knowledge thereof—becomes a more powerful leverage (this is what makes it cartel-like in effect) in the following iteration of negotiation. The power to say: “Yes, you noticed that I am using this dirty trick against you, but we both know that all my competitors use exactly the same trick, so you cannot punish me by switching to another. And it is perfectly legal, because we coordinated this publicly. Your side as a whole sucks at negotiation, my side successfully turned it into a global leverage, and you as an individual face an uphill battle here.”
In general, yes, but there can be other factors that reduce the possibility to interact with many possible partners.
Geographical local monopolies—there are thousands of islands in the ocean, but most of them are too far from your home. You could replace your nearest trade partner with someone further away, at an extra cost; and if your nearest trade partner pushes you too far, you will do it. But within that interval, the negotiation is important.
Upfront transaction costs—even if the trade partners are equivalent, but it is costly to start interacting with another one (you have to do a complicated background check, you need to adapt to their specifics), this again creates an extra cost of switching, and an interval within which it is about negotiation.
Both can apply at the same time.
There is also a gray line between “cartel” and “people doing the same thing, acting selfishly, but updating on their competitors’ past actions”. To make it simple, imagine that that a fair price for a ton of bananas is $100. (Fair price = what would be the market balance if anyone could trade with anyone, in a world with zero transaction costs.) But there is a $8 cost for trading with someone who is not your geographically nearest trade partner. In this situation, the banana buyers can individually precommit to buy at e.g. $95, because they know that you will prefer to sell them for $95 rather than sell someone else for $100, pay $8 for transit, and only keep $92.
Now imagine the banana buyers have a website, where they publicly share their experience. (This is perfectly legal, right?) And there is this highly upvoted article called: “Don’t buy bananas for $100, you can get them for $95 using game theory”. It becomes common knowledge that the banana sellers suck at negotiation (they don’t have an analogical website), and that most banana buyers only pay $95. -- Armed with this knowledge, you can now precommit to only pay $90 for a ton of bananas next year, because now it is known that the best price your neighbor can get from anyone else is $95.
How many iterations can happen, depends on the exact shape of diminishing returns. For example, even if I was willing to pay $100 for my first ton of bananas, but using my power of precommitment I already got them from my neighbor for $85, I am probably not willing to pay $100 for the second ton of bananas. Suppose the second ton of bananas is only worth $90 to me. But to obtain it, from someone who is not my neighbor, I would have to pay $85 + $8, which is more. So I will not defect against the new equilibrium. -- Here I act almost like a cartel member (my first ton of bananas is worth $100 to me, and at the end I only buy one ton, and yet I precommitted to not pay more than $85), but I am still only following my selfish incentives, and at no point I am sacrificing a potential extra profit in favor of keeping the balance.
I feel like I am reinventing here the Marxist class conflict, in a more general form, with emphasis on sharing negotiation tactics. The essence is that one side shares their negotiation tricks, which work individually even if no one else is using them (this is what makes it not a cartel), but quickly become a new standard if shared; and the new standard—and the common knowledge thereof—becomes a more powerful leverage (this is what makes it cartel-like in effect) in the following iteration of negotiation. The power to say: “Yes, you noticed that I am using this dirty trick against you, but we both know that all my competitors use exactly the same trick, so you cannot punish me by switching to another. And it is perfectly legal, because we coordinated this publicly. Your side as a whole sucks at negotiation, my side successfully turned it into a global leverage, and you as an individual face an uphill battle here.”